Pricing Beauty
by Tom Miers
How to solve the crisis in land-use planning and affordable housing
How much does beauty cost? It depends, of course, on the eye of the beholder.
Some will pay a high premium for designer jeans. Others will pay more for a
stylish watch. Last month I read a report that red cars cost £500 more than
black ones.
In all walks of life we're prepared to pay more for beauty, that most
intangible and changeable of commodities. Intangible, because it has no material
function and is dependant on human perception. Changeable, because it is subject
to developing tastes and fashions.
Our visible environment - the natural and man- made landscape - is no
exception. Most of us ascribe value to the beauty of our surroundings. I argue
that it is our failure to quantify this value accurately that is at the root of
Britain's disastrous land-use planning system and its two most deleterious
side-effects - crippling inflation in house prices and the desecration of our
urban and rural landscape with ugly building.
Ask any economist why house prices rise so much and he will point to the
oldest law in his profession. Increased demand is not being met by an increase
in supply. The demand side is fuelled by increasing incomes and the shrinking
family unit (among other factors). But at the same time the supply of new and
refurbished houses has dried up. Rates of house building are at their lowest
levels since the 1920s.
Land-use development rights have been controlled by the state since 1947. It
is government that is responsible, therefore, for the lack of land made
available through the planning system for house building and other development.
A glance through Rettie's publications reveals an enormous discrepancy
between the value of land for different uses. An acre of farming land in
Scotland can easily rise in value twenty-five fold, from say £3,000 to £75,000,
on its owners being granted permission to develop it for housing. Permission
that is in the gift of the state. It is that premium - £72,000 or perhaps
£20,000 per family house in this example - that is the key element in the lack
of affordable housing in Scotland.
Why does the state place such a premium on development? After all, this is
effectively a tax on those trying to get up the housing ladder (usually younger
and poorer people with growing families) in favour of those already on it (often
wealthier, older folk). Not usual behaviour even for this country's perverse tax
system!
The planning system was established to protect our landscape from
'over-development'. It reflects the widespread public desire to maintain the
beauty of our countryside and cities even at the economic cost of doing so. In
essence, therefore, this premium is the state's best guess at valuing what we
would collectively pay for the beauty of our visible environment.
The problem is, as we know to our cost, is that government has a quite
dreadful record at valuing commodities, let alone keeping up with
public tastes and demand for them.
Beauty is no exception to this rule, and this is why the planning
system delivers both insufficient development and ugly development at the same
time.
This is not to say that no attempt should be made to 'price beauty'. Instead,
thepricing mechanism should be taken out of the hands of government and returned
to those who understand the commodity best - the beholding public. In other
words, the right to develop land should be held by the public that enjoys and
can value its beauty. Development rights could be sold or leased according to
the relative merits of development versus conservation.
Such a system would trigger powerful financial incentives for developers to
build as attractively and discretely as possible, to minimise the cost of
development rights. At the same time, development would go ahead where it was
really needed, with a premium on swift decision making and flexibility. In
combination, these forces would lead both to a lower premium for beauty (and
therefore more affordable housing) and better quality development that local
people were happy with. The £20,000 'planning premium' discussed earlier would
become a £10,000 'development fee'.
There are a number of precedents and recent innovations that make this
concept practicable. In the past, landowners have sold or leased land subject to
covenants setting certain conditions of use. This is how Edinburgh's New Town
was built so beautifully and harmoniously. And today, local councils are
increasingly trading development rights for new infrastructure such as schools
or play parks. Devolving these rights further, perhaps to the parish level, and
making them cash-tradeable, would come close to creating an accurate market for
pricing beauty.
Tom Miers is Executive Director of the Policy Institute, a Scottish
think-tank. These ideas are explored further in The New Land Economy, available
at www.policyinstitute.info
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